Report on natural disasters linked to climate change

A recent report on the financial cost to the federal
government of natural disasters, linked to climate change, is “an
affirmation of our research at Insurance Bureau of Canada,” said the
IBC’s vice president of federal affairs, Craig Stewart, on Thursday.

Also on Thursday, the Parliamentary Budget Officer (PBO) released a report
estimating that the Disaster Financial Assistance Arrangements (DFAA)
program can expect claims of $229 million per year due to hurricanes,
convective storms and winter storms and $673 million for floods, for a
total of $902 million, between the years of 2016/17 to 2021/22.

“This report is an affirmation of our research at Insurance Bureau of
Canada, which shows that climate change is a real and present danger
costing government – and Canadians – hundreds of millions of dollars
every year,” Stewart said in a statement on Thursday. “Extreme weather
events driven by climate change have increased in frequency and
severity. Canada is not prepared for the increase in damage caused by
climate change and primarily flood. As the only G7 country without a
national flood program, Canadians, our governments and the insurance
industry are dangerously exposed to severe weather risks.”

On Thursday, IBC president and CEO Don Forgeron spoke at the Economic Club of Canada in Halifax, where he called for
a national collaborative national flood program. Forgeron proposed a
framework for the financial management of flood risk, with shared
responsibilities between the insurance industry, all tiers of government
and consumers. IBC has also just completed flood risk mapping across
all 10 provinces, showing that 19% of Canadian households are at risk of
flood. [click image below to enlarge]

The DFAA, operated by Public Safety Canada, is the primary source of
financial assistance for provinces in the case of disasters, including
ice storms, large forest fires and floods. In the PBO report, titled Estimate of the Average Annual Cost for Disaster Financial Assistance Arrangements due to Weather Events,
the parliamentary budget officer noted that over the past five years
DFAA liabilities have “increased substantially” because of a number of
weather events that have caused heavy damage.

As a result, DFAA’s annual transfers to the provinces have been much
higher than its nominal appropriation of $100 million (see Summary
Figure 2). For example, the DFAA-estimated liabilities for claims not
yet paid in 2015-16 is more than $800 million and about $600 million in
2016-17 and 2017-18.

The report noted that when a disaster occurs, DFAA in general books
the liability in the year of the disaster recognizing its financial
obligation. Yet, the actual transfers to the provinces for disasters can
take place upwards of eight years after the event. This explains the
large estimated transfers shown in Summary Figure 2 (pictured below)
going out to fiscal year 2017-2018.

The DFAA costs resulting from floods represent 75% of the program’s
weather expenditures at $673 million between 2016/17 to 2021/22. “This
high proportion is partly due to the lack of privately available flood
insurance, in Canada,” the report said. “In addition, the program’s
design does not incentivize active flood damage mitigation in many of
the affected areas.”

For example, over the past 10 years (2005-2014), Manitoba,
Saskatchewan, and Alberta have accounted for 82% of all DFAA weather
event costs, almost all of which are a result of flooding, despite
accounting for only 18% of Canada’s population. “The Prairie provinces
face regulatory challenges of reduced enforcement and compliance when
floodplain management is the responsibility of municipalities,” the
report noted.

Furthermore, Saskatchewan has unlicensed drainage of wetlands that
increases peak flows during floods and Alberta appears to have
inaccurate flood maps. In addition, in creating flood maps, Alberta does
not take into account rising groundwater and debris floods on steep
mountain creeks.

One last consideration, the report said, is interprovincial
co-ordination of flood management. “This currently does not exist in
Canada even though it has been shown to be effective at reducing damages
in other countries. This is particularly important in the Prairie
provinces where rivers such as the Saskatchewan and its tributaries span
all three provinces.”